CBS Casebook 2011-2012

CASE BOOK
2011
MANAGEMENT CONSULTING
ASSOCIATION
December 15, 2009

0
Table of Contents
No.
Case Name
Page
Biologics Supplier
TechCo Geographic Expansion
Beverage Company
14
Project Gemini
20
Smartphone Acquisition
23
Pet Medication
33
Struggling Conglomerate
42
PayCo Credit Cards
51
Packaging Operations Integrations
60
10
Accountware
69
11
Madecasse
80
12
Canadian Retailer
89
Case: Biologics Supplier

Case Type: Open-ended / Strategy / Revenue growth. Difficulty: Hard.
Problem Statement Narrative

Your client is a supplier to manufacturers of biological drugs, also known as biologics. Biologics are
manufactured through a complex process, and your client provides tanks, chemicals, steel pipes, and other
inputs to that process. The biologics industry has been growing at a CAGR of 14% per year, and your client
once shared similar growth. In the last few years, however, your clients growth has fallen to a CAGR of 4%.
What could be causing the slowdown, and how can we fix it?
Case Commentary (Notes to the interviewer)

This is a case about a complex industry that tests a
candidates ability to focus on the key drivers of
growth without any industry-specific knowledge.
Data Set (To be provided upon request)

-Our clients primary objective is to increase
revenues. Were not focusing on profitability.
-Other suppliers to the biologics industry have been
experiencing a similar slowdown in sales growth.
- This is a new industry; our client is only about a
decade old, and our clients customers have been
manufacturing biologics for a relatively short period
of time.
Biologics Supplier
Sample Framework
(This is one approach, remember that there are other potential frameworks)
Sample Candidate Framework
Revenue Economics
Competitors
Price (have we decreased

prices?)
Quantity (is our volume
growth stagnating?)
Product Mix (are we
selling cheaper supplies?)
Current Competitors (are

they scaling up?)
New Entrants (is the
market getting crowded?)
Substitutes (are our
products replaceable?)
Customers
Customer Segments
(large, small, specialty,
etc.)
Customer Mix
Customer Needs
Market would be another fair area for analysis. However, the candidate should know from the initial
information that the market is growing at a 14% CAGR.
Biologics Supplier
Potential Areas for Analysis

Revenue Economics
Price: Theres been no change in our prices over
the past few years.
Quantity: Quantities have grown at a CAGR of 4%
a year. (Takeaway: Problem is on the Q side.)
Product Mix: Our product mix has remained

relatively stagnant.
Competitors
Other suppliers to the biologics industry have been
experiencing a similar slowdown in sales growth.
There have been no notable new entrants to the
market.
No substitutes have developed for our products.
Biologics Supplier
Customers (key area in this case)

Our customers are pharmaceutical companies
(both major and minor) who produce biologics.
What could be causing customers to purchase
fewer supplies? (have candidate brainstorm)
True answers in this case:
- Tanks and pipes are long-lived assets; after an
initial ramp up in capacity, they dont need to be
replaced for many years.
- Learning effects/experience curves allow our
customers to manufacture drugs more efficiently
with less equipment.
- Technological innovations have made our
products last longer. A certain tank used to last 2
weeks before replacement, but now lasts 2 months.
- Biologics manufacturers havent been investing
in enough capacity to match expected demand
(key point for next part of case)
4
Exhibit #1 and Math

Questions
Question #1: Hand candidate Exhibit #1. Our team has put together some historical data and projections
on demand and manufacturing capacity for biologics. What do you think?
Question #2: Candidate should get here on his or her own, but prompt if necessary. Why do you think
demand is outstripping capacity?
Question #3: Math. Whats the CAGR for the shortage between now (2011) and 2014?
Solution:
Exhibit #1: A good response identifies that after a brief period of overcapacity, demand is skyrocketing and leaving
capacity in the dust. A great response tries to quantify the shortage and lays out one or more hypotheses for why it
might be. For example: 1) Does it take a long time to add capacity in this business? (Yes.) 2) Are manufacturers
colluding to try and keep prices high? (No.) 3) Are there regulatory hurdles preventing additional plants from being
constructed? (No.)
Math Question: Approximations are fine here. This is a question designed to panic the candidate and test their
comfort with numbers they shouldnt fall for it! Using the CAGR formula would take several minutes; its much
better to approximate. Shortage in 2011 is ~20 and grows to ~60 by 2014. Approximating, we know a 50% CAGR
would be (20 -> 30 > 45 > 67.5) so thats too high. A 40% CAGR is a bit too low (20 -> 28 -> ~40 > ~56 ). 45% fits
much better (20 > 29 > ~42 -> ~60).Alternate method: 20 * (1 + x)^3 = 60, so (1 + x)^3 = 3. Approximating the cube
root of 3, its <1.5 and >1.4, so .5 > x > .4.
Key Implication: The shortage is growing at an astounding rate 45% compared to demand growth of 14%.
Gravity has to take hold at some point will there be a massive upswing in capacity in 2015/2016?
Biologics Supplier
Brainstorming
Question
Assume that were pretty confident the numbers in Exhibit 1 are true and demand wont pick up through
2014. What are some other ways our client could increase revenues?
Question #2 Solution:
Candidate should brainstorm as many (and as creative) options as possible. Two important areas:
- Gain share:
-Cut prices or increase marketing and direct sales
-Innovate with better-quality product
-Change product mix toward items that need to be replaced more often
-Acquire a competitor and try to gain supplier power to increase prices
- Create new revenue streams:
-Get into services to help customers meet the upcoming capacity shortage
- Begin selling additional inputs into the biologics manufacturing process
- Get into the biologics industry ourselves! (Massive growth + capacity shortage.)
Biologics Supplier
Conclusion
Example Recommendation
o Our client should take advantage of the upcoming capacity shortage by getting into services to help
our customers (the biologics manufacturers) ramp up capacity.
Note: Any recommendation is appropriate as long as it involves
taking advantage of the capacity shortage in some way.
Risks
o Risk #1: Manufacturers arent interested in ramping up capacity, prefer to try and drive prices up
o Risk #2: We dont have any expertise in services
o Risk #3: The market for services may be saturated
Next Steps
o Next Step #1: Speak to our customers to ensure this is a viable model
o Next Step #2: Assess our own expertise

o Next Step #3: Assess the market for services
Biologics Supplier
Exhibit: Biologics Demand and Capacity

(millions of units)
180
160
140
Demand
Capacity
120
100
80
60
2008
Biologics Supplier
2009
2010
2011
2012e 2013e 2014e
Case: TechCo Geographic Expansion

Case Type: Go/No-Go Decision, Business Planning
A technology company, TechCo, is considering expanding sales of its phones and computers to the island of
Paradise. Theyre trying to determine the best way to go about doing so and currently have three strategies on the
table: (1) opening retail storefronts, (2) selling products via the web, and (3) distributing through existing Mom-andPop shops on the island. Should they expand into Paradise, and, if so, which approach should they pursue?
Notes to the interviewer
Info/Data (To be provided upon request)
The goal of this case is to, first, have the

interviewee determine if theres a
sufficiently compelling case for entering
Paradise.
Paradise:
Population 3M, with the main (and only) city on the island
very densely populated (nearly all locals live there, tourist
operations are on the outskirts of the island)
Inhabitants generally wealthy (and wealth is well-distributed)
Island enjoys broadband and wireless access in general,
good infrastructure
Main industry: high-end tourism
Right now, the islands inhabitants cannot purchase any Apple
products (there are no regulatory hurdles preventing them from doing
so, its just that Apple and the various service providers have not
decided to pursue the opportunity to date)
The island has an unreliable shipping system (often problems
getting products from multi-nationals imported)
Paradise tuned into mainstream media, so well aware of Apple
brand
Currently, there is one Mom-and-Pop style local manufacturer
selling all of the islands electronics and appliances; utilitarian in its
approach (functional focus over style)
The interviewee should consider each entry

strategy thoroughly; a good interviewee
should bring to bear at least some outside
knowledge of Apple, its brand, operations,
and marketing.
The interviewee should focus exclusively

on the viability of the phone and computer
business lines, but the final
recommendation can factor in the
possibilities of selling a broader product
suite.
Sample Framework
First, Id like to consider whether expanding onto the island makes sense:
Is their a market of desiring buyers? Can these buyers afford phones and computers? (Customers)
Is it strategically sound for Apple to consider geographic expansion in the first place? (Company
Capacity)
How strong is the competition that currently sells electronics on the island? How realistic is the goal of
carving out a profitable position in the market? (Competition)
Then, Id like to evaluate the three proposed strategies:

(1) Retail Storefronts:
Pros
Cons/Risks
Associated Costs
(2) Web-based sales:
Pros
Cons/Risks
Associated Costs
(3) Distribution through Mom-and-Pop storefronts:
Pros
Cons/Risks
Associated Costs
10
Quantitative Problem Solving

Sample Candidate Problem Solving: Economics
Interviewer: Sounds like a great framework. Lets address your first question around whether expanding onto the island
makes sense. You should know that Apple has an internal hurdle rate it must believe it can clear before expanding into a new
market an average net margin of 10%.
Interviewee should ask if theres available data on Apples margins per product.
Company plans to sell phones for $200, which will lead to a 5% net margin, and computers for $1,000, with a 20% net margin.
This pricing is consistent with what the company offers in other developed markets.
Interviewee should ask whether Apple can make reliable forecasts as to what theyll manage to sell, or at least what the mix
between phones and computers will be.
Apple anticipates that first-year sales will be 90% phones, 10% computers.
Interviewee should go about calculating whether the anticipated sales mix will clear the blended margin hurdle.
Phones: 5% net margin on $200 equals $10 return per sale ($200*0.05).
Computers: 20% net margin on $1,000 equals $200 return per sale ($1,000*0.2).
Multiple approaches can be take to solve. Plug approach:
If Apple sells 100 products on the island, then 90 of these are phones and 10 are computers, which
would imply $28,000 in revenue.
The blended margin would be:
Phones: $900 return ($10*90)
Computers: $2,000 return ($200*10)
Aggregate return: $2,900 on $28,000 in sales $2,900/$28,000 = 10.357%
Clears hurdle rate!
11
Qualitative Problem Solving

Sample Candidate Problem Solving: Entry Approach (not exhaustive)
Retail storefront:
Pros:
Consistent with current model in most developed markets, in-store experience is key component of brand image (Genius Bar,
sleek design, etc)
Since Paradises population is very concentrated, one store could theoretically address whole market
[Interviewer may ask if a store is justified, given the size of the market. Interviewee can take various approaches to
rationalize here e.g., Paradise has a population of 3M, NYC has a population of 8M and multiple stores just in Manhattan,
so, yes, it seems justified.]
More seamless mechanism for introducing new products to customers, easier to get customer feedback
Cons
More upfront investment required
If market doesnt bear fruit, more expensive to exit
Associated Costs:
Real estate purchase or rental (interviewee can talk out logic here)
Employees
Via website:
Pros: Low-cost way to test market
Cons
People tend to want to test out phones, feel them in their hands, etc. (possibly less of a concern for laptops, e.g., Dell has had
success with online order model)
Apple tends to sell a lifestyle, this is more difficult to convey just through a website
Island has traditionally had difficulty with international shipments. Would Apple need to develop its own delivery process? How
expensive would developing a partner with a FedEx or UPS be?
Associated Costs:
Delivery, otherwise minimal
Via Mom-and-Pop shops (current local player)
Pro
Sales infrastructure exists
Customers are comfortable with these outlets and the store owners know the local market very well
Might make it easier to make agreement with local service provider/carrier
Cons
Could be difficult to form relationships with each mom-and-pop player (if interviewer hasnt shared that theres only one big
electronics player on the island); once that info is shared local player could squeeze Apples margin, may have sales reps
placing greater emphasis on the locally manufactured products
12
Conclusion
Recommendation
o If interviewee has made compelling case for Web-based sales, could go in that direction, but, more likely
o Apple should proceed with entering Paradise because the islands citizens fit into the mold of the companys target market (affluent, wellconnected) and because existing, sole competitor offers a product thats compelling on price rather than design. Give the firms
projections, the product sales mix will allow them to clear their internal hurdle rate. Given the importance of distinguishing between Apple
and the cheaper, functional alternatives, Apple should open a retail store, which would be consistent with the firms approach in other
markets, allow them to create the holistic brand experience, and pave the way for more upselling and cross-selling of other products.
Risks
o Hurdle rate contingent on soundness of companys projections
o If other sleek tech providers (Android devices, etc) partner with the existing local franchise, the competitive dynamics change,
possibly rendering the recommended strategy less attractive.
If you get through the case quickly and have extra time
Scenario: Apple has decided to invest in a presence on the online and has built a retail store. The official opening/launch is this coming
Saturday. It turns out the local player has secretly been developing a similar phone and laptop and it intends to announce the new
products on Friday. General consensus is that the competitors products are not as high-quality as Apples, but the move upstream is of
concern since it may threaten Apples anticipate market share. The local player will be offering their phone at $100 and laptop at $600.
An outside consultant has floated the idea of decreasing Apples launch prices in response dropping the phone to $150 and the
computer to $800. Is that the right move?
Goal here is to get the interviewee to switch directions quickly with a new problem and see how consistent his/her approach to the
business is. If the candidate has contended throughout that Apples competitive advantage is design/quality over price, then the
appropriate response is that Apple should focus on its marketing and product differentiation rather than pricing schemes. Additionally,
interviewee should cite that such price decreases would affect the net margin calculations/conclusion. Recommendations on
advertising/marketing messaging can be brainstormed. NB: if a strong candidate gets here quickly, the interviewer might ask if Apple
should consider INCREASING its prices. Interviewee should note that it was previously mentioned that Paradises inhabitants are wellconnected to outside media and would be aware of the price discrimination, and accordingly resent it. This could hurt Apples long-term
prospects on the island.
13
Case: Beverage Company

Case Type: Profitability, Brainstorming

Your client is a beverage company. 5 years ago, the company earned $1 billion in sales. However, in the
last 5 years, sales have fallen to $800 million. Profits have also fallen from $150 million to $100 million in
the last 5 years. You have been hired to determine why this company is seeing a decline and to
determine what they could do differently.

This is largely open-ended and a brainstorming
case.
Beverage Company

The overall size of the market is $1.5 billion.
There are 2 other main competitors:
Player B, market share $400 million
Player C, market share $300 million
14
Sample Framework
Company
Distribution channels
Products, pricing
Revenues/Costs
Marketing/Advertising
Market
Growing/flat/declining
Competitors products/pricing
Customers
Brand perception
Demographics
Changing trends?
Beverage Company
15
Question #1
Question #1:
What do you think has caused the declining sales and profits for the company?
Information to be provided upon request:
The company makes 2 products:
Fruit Juice 100% juice, healthy
Fruit Drink has sugar, chemicals, water; accounts for 95% of sales
Player B produces Fruit Juice and revenues have increased in the last 5 years.
Player C produces Fruit Juice and Fruit Drink, revenues have been flat over the last 5 years.
The candidate should determine that changing consumer trends towards a healthier lifestyle has caused an increase in the sales of
the healthier fruit juice product. Costs have also gone up (leading to a decrease in profits) because it is more expensive to make a
100% fruit drink than one diluted with chemicals, water and sugar. Candidate should suggest the company reposition itself to focus
on Fruit Juice products.
Beverage Company
16
Question #2
Question #2:
Consumers like our clients brand and associate it with high-quality products. However, consumers
question the clients credibility in the healthier Fruit Juice segment. Player Bs marketing has especially
been attacking the clients credibility. What should the client do?
Candidate should brainstorm. Possible solutions:
Re-label products to emphasize 100% fruit juice, not from concentrate
Highlight health association in marketing campaigns, advertising
Market to parents, since kids dont care about healthy
Partner with fitness centers to distribute trials, promotional materials
Beverage Company
17
More Questions
Question #3
Profit margins on Fruit Drink are $0.25/case.
Profit margins on Fruit Juice are $0.15/case.
What should the client think about when
determining how much production it should
transfer from Fruit Drink to Fruit Juice?
Question #4
Lets say that the client is owned by a PE firm
who is looking to sell the company in the next 3
years. What would you tell the PE firm in
regards to changing the management team?
Beverage Company
Possible Answer #3
The client will have to make a good case for
moving production from Fruit Drink to Fruit
Juice, given that the margins are $0.10/case
higher for Fruit Drink. Client should conduct
detailed market research to determine if the
trend towards healthier lifestyles will continue in
the future. Client may also consider raising
prices on Fruit Juice or finding ways to reduce
costs.
Possible Answer #4
This depends on the PE firm. Does it own other
complimentary companies in its portfolio with
experienced management teams in this
business? If so, the PE firm should use the
outside management team if it has been
successful at quick turnarounds in this business
area.
18
More Questions
Question #4
Lets say instead that the client is owned by an
agricultural co-op of 900 farmers. A big
beverage company, say Pepsi, has offered to
purchase the client at a significant premium.
The co-op is hesitant to sell. Why do you think
this might be?
Question #5
After this project, if you were to take a job with
the client, what position would you want within
the company and why?
Beverage Company
Possible Answer #3
A company like Pepsi has established supply
sources. Pepsi may stop sourcing from the
agricultural co-op, the farmers could lose profits,
jobs.
An issue of culture. The agricultural co-op does
not want to sell-out to corporate America.
Possible Answer #5
Open-ended.
19
Case: Project Gemini

Case Type: Business Planning/Investment Decision-Making
You have twin siblings, Ron and Rhonda. They are into physical fitness and total body health. Having recently graduated from
UConns sports health and management program, they have decided that they want to start a chain of Fitness Centers dedicated to
training, nutrition, and balanced life style.
They can raise some money from family and friends, but they will need to secure financing. They have been told they need a business
plan in order to secure enough money to open their first five centers. Ron and Rhonda dont know how to go about writing a business
plan, so they turn to you.
There are four questions to address: (i) What are the 3-5 big strategic questions you would ask your siblings about their business?, (ii)
Please outline the topics you would cover in a business plan., (iii) What elements would you use to forecast first year revenues for the
business?, (iv) Would you invest in this business? Why or why not?

This is a more non-traditional case. The interviewee should
drive, but use the four questions above as guides, aiming to
tackle each in the allotted time.
After the interviewee offers their 3-5 big strategic questions,
take a step back and ask the interviewee to brainstorm
potential sources of funds:
friends and family
loans (secured loans could be feasible because the
business will likely have physical collateral)
equity: corporate ventures/strategic partners, angel
investors
Project Gemini

No data. When asked, prompt the interviewee to brainstorm
reasonable assumptions/numbers. There isnt really an
expectation in this case that the applicant will do math, but
you do want to push him/her to explain the inputs theyd draw
on to do calculations.
20
Sample Framework
(interviewee should use the 4 questions as a broad framework)
Question 1
Questions can go in a number of directions, but should aim to elucidate the economic case for the business, the
vision and aspirations of the founders, and the market environment. Examples:
(1) How will you make money? (what are the revenue streams?)
(2) What will it cost to run your business successfully?
(3) How will you get customers? (what do these customers look like?)
(4) How big will your footprint be? (in the immediate, given funding goals, and in the future?)
(5) Whats the competitive landscape? How is your proposed business different and better?
(6) What macro factors will impact your success? (to ensure your siblings are looking at the big picture)
Question 2
EXAMPLE:
Mission statement (story focus): Why us? Why we care. Why now?
Management overview
What well be creating. Fitness center components:
1. training
2. nutrition
3. balanced life-style
How well make money (detailing each business line)
What is will cost (detailing each business line); distinguishing between fixed costs (physical, open/closed)
and variable
Profitability breakeven time horizon, how well prioritize growth (debt repayment, equity, reinvestment)
Competitive landscape/macro
Formal customer acquisition
Risks present rosily, but acknowledge theyre there
Exit strategy
Strategic buyers? Management buyout? (latter likely preferable to most potential investors,
indicates entrepreneur commitment)
Project Gemini
21
Sample Framework
(interviewee should use the 4 questions as a broad framework)
Question 3
Calculating revenues. More about setting up the approach than actually calculating:
Revenue = Price * Quantity
How will we price our services and what are the rev implications?
Candidate should think about the pros/cons of bundling membership to the three
business lines, talk through the anticipated customer bases, possibilities of a la carte
strategies, etc.
Gym access
Training sessions
Counselors
Classes
Concierge services
Value-added services
Food, drink, towels, etc.
(Interviewee should discuss which aspects of the business would have the best
margin)
Cross-selling, upselling
Pricing: flat-fee (monthly, annualized?), pay per use, training sessions a la carte, etc.
A strong interviewee will develop a structure for addressing this individual question: e.g., formula for revenue, what
would be a reasonable approach for anticipating price (pricing strategies) and quantity (what inputs would help form
a reliable customer penetration model, etc).
Question 4
Investment decision should flow from views offered throughout the case, especially those brainstormed during the
business planning section:
is the market attractive/is there demand?
does interviewee trust these siblings as operators?
does the exit strategy seem sound/will there be an attractive ROI?
any concerns about family businesses?
Project Gemini
22
Case: Smartphone Acquisition

Case Type: PE / Market Entry. Difficulty: Medium to hard.

Its late 2006, and our client is a PE firm looking to acquire a company in the emerging smartphone industry.
There are currently only two firms in the market: SmartCo and PhoneCo. Our client has decided to definitely
purchase one of the firms, but theyve hired us to help them figure out which one. How would you approach
this problem?

- This is an exhibits-heavy case. After the
framework, guide the candidate to Question #1
(market size) as

-The iPhone was announced in January 2007 and
launched in June 2007, so it shouldnt be a factor in
the initial decision.
-In the real world, there were more than two firms
in the market. This is a simplified case, so what you
know about RIM, Motorola, Nokia, etc. doesnt
necessarily apply.
- Our client cares about the value of the firm at an
exit in 5 years, so a DCF wont be necessary.
23
Sample Framework
Valuation Economics
Revenues (Price and
Quantity [Market Size and
Share])
Costs (Fixed and
Variable)
Discount Rate
Smartphone
Companies
Products (SmartCo vs.
PhoneCo)
Technology (patents or other
technological advantage)
Barriers to Entry (how easy
is each company to copy?)
Smartphone
Customers
Segmentation
(behavioral?
demographic? incomebased?)
Needs by Segment
(keyboard? security? fast
connectivity? etc.)
The discount rate isnt necessary here, but is a good thing to include in the framework. A great framework
will address not only the economics of the deal (revenues and costs), but also discuss other reasons our
client might want to purchase a particular company, including advantages with customer segments,
technology and patents, capabilities (design, R&D, marketing)., etc.
24

Revenues and Costs
Customers and Products

Variable costs are $150 per unit for SmartCo, $200
per unit for PhoneCo
- Price is $250 per unit for SmartCo, $300 per unit
for PhoneCo
-Ignore fixed costs (but more sales mean fixed
costs are less of an issue)
Hand the candidate Exhibit #2 (see slide for notes).
Market Size
Hand the candidate Exhibit #1 (see
slide for notes).
25
Exhibit #1 and Math

Questions
Question #1: Hand candidate Exhibit #1.
Our client expects the mobile phone market as a whole to grow 5% over the next 5 years.
Our client also expects smartphones share of the mobile market to grow 50% for businesses, 100% for
prosumers, and 200% for consumers over the next 5 years.
What will the smartphone market be in Year 5 for each segment? What does that mean for us?
Solution:
Note: Approximation is fine for this question. (In fact, getting the exact numbers would take too long.)
Business
Prosumer
Consumer
Total Market (Year 1)
$60b
$80b
$300b
Smartphone Market (Year 1)
$30b
$20b
$15b
Total Market (Year 5)
$63b
$84b
$315b
Smartphone Market (Year 5)
$47.25b
$40b
$45b
Smartphone Growth ($)
$15.75b
$21b
$29.25b
Smartphone Share of Mobile Market
75%
50%
15%
Solution: While all segments are approximately equal in Year 5, most businesses and half of prosumers are
using smartphones. Meanwhile, only 15% of customers are using smartphones, which means the consumer
market has much more room for growth. We should acquire the company that appeals to consumers.
26
Exhibits #2 and #3
Questions
Question #1: Hand candidate Exhibit #2.
Heres some data from a survey of all smartphone customers. What does this mean for our client? Is there
any other information youd want to know?
Question #2: Hand candidate Exhibit #3. (Ideally, the candidate should ask for this data in the previous
question.) Heres that same survey broken out into two segments. What does this mean for our client?
Solution:
Question #1: This is a red herring; there isnt much information here that is helpful to our client. A bad
response tries to draw too much meaning from these numbers. A good response identifies that the phones
are more or less equal to all customers. A great response identifies that this data might be different for each
customer segment and asks whether theres any additional information on how each segment sees the two
products.
Question #2: A good response identifies that SmartCo appeals to consumers and PhoneCo appeals to
businesses. (If asked, prosumers are a mix, but lean slightly toward SmartCo.) A great response ties this
information together with the market size for consumers from the previous question and recommends that
our client purchase SmartCo unprompted.
27
Conclusion
Recommendation
Our client should purchase SmartCo because they produce a phone that appeals to consumers. Consumers
will be roughly a third of the market in five years, but since smartphones will only be 15% of the mobile
phone market, the consumer segment will have enormous room for growth (whereas businesses and
prosumers will not).
Risks
o Risk #1: Competitive entry. What if another player enters the market and tries to go after consumers?
o Risk #2: PhoneCo. What if PhoneCo sees the consumer growth numbers and comes after our market?
o Risk #3: Customer preferences. What if consumers value different attributes as the market grows?
28
Bonus Question
Questions
Give this bonus question of the candidate has extra time and has correctly identified SmartCo as the
most attractive acquisition option.
Based on your recommendation, our client has decided to purchase SmartCo. But before they sign the deal,
Apple announces that theyre releasing the iPhone. Does your recommendation change?
Solution:
The candidate can answer this question in three ways.
SmartCo is still the best bet. Potential reasoning:
-The consumer market is big enough for multiple players
- Were a 4.7/5 on style and a 4.8/5 on price can Apple really beat that?
- The iPhone may be just as appealing to businesses and prosumers; PhoneCo wont be safe.
PhoneCo is a better bet. Potential reasoning:
-Why compete with Apple when we can have a niche to ourselves?
- Customers rank SmartCo highly now, but that might change when the iPhone is released.
Our client shouldnt acquire either player. Potential reasoning:

-Theres too much uncertainty in the market.
-This is a very new industry, and anything can change; we should wait a few years to get a better picture.
-Smartphone Acquisition
29
Exhibit 1: Mobile Phone Market (2007 est.)

Business
Prosumer
Consumer
(total market: $60b)
Current
Smartphone
Market:
50%
Current
Smartphone
Market:
25%
Current Smartphone Market:

5%
30
Exhibit 2: Customer Survey

(scale of 1 to 5)
Survey Question 1:
How important are the following attributes in a smartphone?
Survey Question 2:
How would you rate [SmartCo / PhoneCo]s performance on each attribute?
Attribute
Web
Style
Price
Screen
Apps
E-mail
Importance
4.7
4.6
4.2
3.9
3.7
3.4
SmartCo
3.9
4.7
4.4
3.6
4.2
3.4
PhoneCo
4.5
4.2
3.6
3.7
3.0
4.4
Scale:
5 = highest
1 = lowest
Sample:
All customer segments
31
Exhibit 3: Customer Survey by Segment

(scale of 1 to 5)
Survey Question 1:
How important are the following attributes in a smartphone?
Survey Question 2:
How would you rate [SmartCo / PhoneCo]s performance on each attribute?
Businesses
Consumers
Attribute
E-mail
Web
Screen
Attribute
Style
Price
Apps
Importance
5.0
4.8
4.4
Importance
4.7
4.6
4.2
SmartCo
3.2
3.7
3.9
SmartCo
4.9
4.8
4.4
PhoneCo
4.7
4.5
4.0
PhoneCo
2.8
3.2
2.6
Scale:
5 = highest
1 = lowest
Sample:
Business segment customers
Consumer segment customers
32
Case: Pet Medication

Case Type: Revenue Growth, Customer Analysis

Your client is Petvascent, a pharmaceutical company that makes drugs for pets. One of the clients leading
products is Clean Heart, a drug that is given to dogs with heart worms, has recently suffered declining sales.
Petvascent has hired our firm to determine what the problem is and restore sales growth.
The interviewer will ultimately discover that some

vets are making large purchases at wholesale
prices and selling them to other pet stores. While
this is a grey area in the law, it is ultimately not
illegal and the interviewer must determine a
creative way to restrict this practice. In addition, the
interviewer must consider the implications of their
method for preventing the redistribution of the drug.
Once prescribed, Clean Heart is taken weekly for one year.

Petvascents patent on Clean Heart that will expire in 2020.
There are other medications on the market for heart worms, but
none is as effective as Clean Heart.
There have been no changes in the proportion of dogs
diagnosed with heart worms.
Petvascent has an exclusive distribution agreement with
PetCo, a national pet store chain, and also sells to vets so they
can provide an initial dose to patients, who are then 95% more
likely to purchase Clean Heart in stores.
However, PetCo has recently complained that Clean Heart is
available at other pet stores at a lower price, a clear violation of
the exclusive distribution agreement.
Begin by showing Exhibit 1, and ask the candidate to analyze
the chart
Pet Medication
33
Suggested Order for Case

Suggested Order for Case
Read prompt & answer clarifying questions
Candidate should lay out framework
Guide candidate to investigating competitors
Hand out Exhibit 1
Ask Question 1
Steer candidate to what could possibly cause a decline in revenue
Price decrease vs. unit sales decrease
Give Exhibit 2 to discuss unit sales
Ask Question 2
Candidate should calculate profit and % change in profits
Why would vet purchases increase so much?
If necessary, remind candidate of lower priced Clean Heart available in stores outside of exclusive
agreement with PetCo
Knowing that vets are re-selling to other pet stores, what steps should Petvascent take?
Re-selling is not illegal if box is not clearly labeled
Besides changing label:
Limit purchases by vets
Change purchase agreements
What are the risks of those steps?
Recommendation
Pet Medication
34
Sample Framework
Prescription rate
Vets
Alternative treatments
Relations with Petvascent

# diagnosed
Frequency at vet
Pet Owners
Trends in pet ownership
Fewer dogs
Affordability
Seeking cheaper drugs
# undiagnosed
No treatment
Pet Drug
Companies
Marketing
New entrants
PetCo
Petvascent
Quantity
Type
Pricing
Differentiators
Pricing
Increase in real price
In store
Retail competitors
Change in displays
Online
Other pet stores
Unit sales
Patent?
Wholesale pricing
Marketing
Pet Medication
35
Question #1
Question #1:
[Give the candidate Exhibit 1] What does this chart indicate about Petvascents position in the market?
Petvascent is the market leader
From 2008-2011, Petvascents revenue declines faster than the market and is dragging the market size down
Two new entrants appeared in 2005, neither appears to have grown significantly
Bonus: Other competitors appear to be fairly stable, indicating that no one is stealing share from Petvascent
The candidate should now investigate other reasons that sales may have declined.
Pet Medication
36

Vets
Have slightly
increased
recommendations
of Petvascent
Pet Owners
Continue to own
dogs at similar
rates
Continue to take
Most vets continue
pets to vets at
to order the same
same rates
amount, a few
Continue to follow
have vastly
instructions from
increased their
vets with same
orders
variety
View Petvascent
positively
Continue to spend
money on pet
medication
Trust in Clean
Heart as best
medication
Drug Cos.
There have been
new entrants
However, no new
drugs have made
significant
improvements and
remain low-level
players
PetCo
Observed declining No changes to

unit sales
marketing, in
quality or type
Orders
replacements to
replace sales
No changes to
wholesale pricing
Has continued to
price at $20/unit
Unit sales have

actually increased
(show Exhibit 2)
No changes in
marketing quantity
or type
Angered by
presence of Clean
Heart in other
stores
No changes in
price
Other stores
charging $17/unit
Charges $17/unit
to PetCo
Charges $10/unit
to vets
Continues to only
Maintains online
distribute Clean
store presence that Heart through
is comparable with
PetCo and Vets
industry leaders
No change to
Same marketing
and display
Pet Medication
Petvascent
packaging
37
Question #2
Question #2:
Estimate 2009 & 2010 profits. What is the % change in profit level?
Raw materials: $5/unit
Vet Price: $10
Packaging: $0.5/unit
PetCo Price: $17
Transportation: $1/unit
Marketing: $100m (2009) and $110m (2010)
SG&A: $50m (2009) and $55m (2010)
The candidate must estimate
units and revenue in each year
from Exhibit 2; allow any
reasonable estimate
The candidate should sum the
variable costs to find a single
figure
If the candidate asks, allow

reasonable rounding
Subtract points if the candidate
fails to find the % change in
profit level without prompting
Pet Medication
Revenue
2009
2010
Vet Units
15,000,000
18,000,000
Vet Price
$10.00
$10.00
PetCo Units
22,000,000
20,000,000
PetCo Price
$17.00
$17.00
Total Rev $524,000,000 $520,000,000
Costs
2009
2010
Total Units
37,000,000
38,000,000
Variable Costs
$6.50
$6.50
Total VC $240,500,000 $247,000,000
Marketing $100,000,000 $110,000,000
SG&A $50,000,000 $55,000,000
Total Costs $390,500,000 $412,000,000
Profit
2009
2010
Revenue $524,000,000 $520,000,000
Total Costs $390,500,000 $412,000,000
Profit $133,500,000 $108,000,000
% Change
-19%
38
Conclusion
Recommendation
o Revenues have declined because vets are reselling Clean Heart to competing retailers at a lower price,
which undercuts sales at PetCo.
o To combat this, Petvascent can (1) add Not for Resale to packaging (2) change sales contracts with vets
and/or (3) limit purchases by vets
Risks
o New sales contracts may alienate vets who are good customers
o Customers may have grown used to lower priced Clean Heart
Next Steps
o Re-evaluate price elasticity of demand
o Discuss sales contracts with vets
Pet Medication
39
Exhibit #1
Revenues from heart worm drugs by Competitor ($ millions)
600
Client
500
Competitor A
Competitor B
400
Competitor C
300
Competitor D
Competitor E
200
Competitor F
Competitor G
100
Competitor H
0
Growth Rates
Market
Client
Pet Medication
Competitor I
2000
n/a
n/a
2001
2.40%
2.97%
2002
2.74%
3.57%
2003
5.72%
3.43%
2004
8.81%
3.11%
2005
12.20%
3.76%
2006
2.70%
2.76%
2007
1.23%
3.07%
2008
-4.36%
-4.69%
2009
-0.09%
-0.91%
2010
0.10%
-1.06%
2011
-1.66%
-1.76%
40
Exhibit #2
Petvascents Unit Sales of Clean Heart by Distribution
45,000,000
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
Vet Units
PetCo Units
10,000,000
5,000,000
0
Pet Medication
41
Case: Struggling Conglomerate

Case Type: Improving Profitability

Your client, SupplyCo., has three business lines: paper, janitorial supplies, and packaging supplies.
Profitability is low at SupplyCo. has hired our firm to figure out why and to develop a solution for the
problem.

Basic analysis to determine that SupplyCo.s profit
has declined because the companys costs are too
high as compared to competitors. The candidate
will be asked to brainstorm at several points and
should be pushed for more ideas. Finally, the
candidate will be required to calculate profits for
several alternative strategies.

Provide Exhibits as instructed.
42
Sample Framework
Quantity
Profitability
Revenue by business line

Costs by business line
Product mix
Price
Fixed
Variable
Customers
Preferences
Who are they
Marketing
Competitors
New entrants
Substitutes
Shift from paper

Green supplies
B2B
B2C
Quantity
Type
Pricing
Differentiators
Internet
Volume
Distribution
Direct Sales
Distributors
Time to sale
43

Profitability
Prices have remained
the same
Paper sales and
packaging sales have
declined; janitorial sales
have remained steady
Customers
Paper large
businesses, office
supply stores
Janitorial supplies
large janitorial
companies
Packaging shipping
companies, retailers
with shipping service
Preferences remain the
same
Demand for paper
dropping with internet
Competitors
Distribution
Marketing has remained Has distribution by

similar across the
internet and retail
business line
Time to sale has
No new entrants
remained constant
No specific
differentiation across
business lines;
SupplyCos products are
generally well regarded
Uses direct sales to

large customers,
internet sales for
smaller customers, and
distributors
Substitute internet.
Email has replaced
printing and mailing,
reducing demand for
both paper and
packaging.
This mix has not

changed
44
Question #1
Question #1:
Profitability is declining what are some reasons that could be?
Costs
Increase in SGA
Increased marketing with no increase in sales
Increased material costs
Higher labor
Revenue
Decreasing real prices more discounts
Reduced quantity change in preferences, competitor influence
Shift to less profitable products
45
Question #2
Question #2:
How can we determine if our clients costs are too high? [Steer to Exhibit 1 competitor costs]
[After analysis]
How could the client improve these ratios?
[could be improved by: (a) raising prices to increase sales (b) renegotiating supplier agreements (c) finding
cost efficiencies in back office]
SupplyCo is in the bottom 25% in all business units
Revenue
COGS
SG&A
Inventory
COGS/Revenue
SG&A/Revenue
Net Income
Inventory Turnover
$ millions
Paper Janitorial Packaging Total
323
451
157 931
291
400
138 829
31
42
15
88
100
180
51 331
90%
10%
0.3%
3.2
89%
9%
2.0%
2.5
88% 89%
10% 9%
2.5% 1.5%
3.1 2.8
Competitors
Paper
Janitorial
Packaging
Top 25% Bottom 25% Top 25% Bottom 25% Top 25% Bottom 25%
79%
4%
17%
5.1
88%
9%
3%
3.7
77%
5%
18%
4.3
91%
9%
0%
2.7
83%
3%
14%
4.9
87%
11%
2%
2.9
46
Question #3
Question #3:
Brainstorm ideas for revenue growth.
[After initial brainstorm push for more ideas]
[Distribute Exhibit 2]
If the company needs to gain another $50 million in profit, which of these scenarios should they
pursue? They can pursue more than one at once.
They should pursue Option B & C in tandem
Option A should not be pursued because (A) expected share is unknown (B) it is completely outside from
the companys competency
Both B & C fail to achieve $50 million in profits
A
B
C
Market Size $50,000,000,000 $2,700,000,000 $10,000,000,000
Expected Share
10%
1%
Margin
35%
15%
10%
Profit n/a
$40,500,000
$10,000,000
47
Conclusion
Recommendation
o The clients costs are too high relative to its sales; the client must achieve greater synergies and should
then pursue recycled products and expand its customer base in janitorial supplies.
Risks
o Reaching smaller companies for janitorial supplies may be more costly and could drive up SG&A costs
o Entering recycle products business will mean competing with established players
Next Steps
o Investigate costs associated with expanding janitorial supplies sales networks

o Seek financing to support simultaneous expansion in two markets
48
Exhibit #1
Costs by Business Unit
Revenue
COGS
SG&A
Inventory
$ millions
Paper Janitorial Packaging Total
323
451
157 931
291
400
138 829
31
42
15
88
100
180
51 331
COGS/Revenue
SG&A/Revenue
Net Income
Inventory Turnover
Average Cost Ratios by Competitor

Competitors
Paper
Janitorial
Packaging
Top 25% Bottom 25% Top 25% Bottom 25% Top 25% Bottom 25%
79%
4%
17%
5.1
88%
9%
3%
3.7
77%
5%
18%
4.3
91%
9%
0%
2.7
83%
3%
14%
4.9
87%
11%
2%
2.9
49
Exhibit #2
Option A: Pharma
Option B: Recycled Products
Providing basic raw materials and Providing recycle pulp and

supplies to pharmaceutical
materials for paper, cardboard,
companies
and packaging to paper product
companies, greeting card
Market Size: $50 billion
companies, etc.
Average Margin: 35%
Market Size: $2.7 billion
Competition: 8 competitors hold
Average Margin: 15%
10% each
Customers: Major pharmaceutical Competition: Other paper and
packaging companies
companies
Likely share: Unknown
Customers: Paper product

companies, greeting card
companies, suppliers to
restaurants, coffee shops, etc.
Uses existing customers that
SupplyCo is acquainted with.
Option C: Janitorial Supplies for

small/medium business
Provide janitorial supplies to

small to medium sized
businesses
Market Size: $10 billion
Average Margin: 10%

Competition: Generally smaller
supply companies; regional
players
Customers: small to medium
sized businesses. Unknown
customers, but similar demands
as current customer list.
Likely share: 1%
Likely share: 10%
50
Case: PayCo Credit Cards

Case Type: New Market Entry

PayCo is a credit card company with over $5B in revenues in 2010. Their recently developed Tap & Go
proprietary technology has been very successful, and they now want to leverage it to the cashdominated public transportation sector.
PayCo has asked for our help in commercializing Tap & Go for transit transactions.

This is an exhibit-driven case. The interviewee
should base the analysis on the information
provided in the exhibits and identify the most
important data points.

Tap & Go is a feature that allows consumers to
pay by simply tapping their credit card or mobile
phone on a payment reader at checkout.
Tap & Go is currently used for small purchases
(<$25) at places like supermarkets, fast-food
outlets, bars and parking lots.
Our client has a 5 year investment horizon
(2011-2015).
PayCo Credit Cards
51
Sample Framework
Market
Market Size / Growth
(Whats the potential
of Tap & Go for
transit?)
Current Competitors
/ New Entrants
(similar offerings?)
Substitutes
(competing
technologies such as
the Google Wallet?)
PayCo Credit Cards
Company
Customers
(segmentation,
average spend on
public transportation,
willingness to adopt
new technologies)
Capabilities (patent,
expertise with Tap &
Go, partnerships that
can be leveraged)
Economics
Revenue
Price (lump sum fee
from retailer + per
transaction
fee) x Quantity (# of
transactions)
Costs
Fixed (R&D, SG&A,
advertising, IT,
support center)
Variable (cost per
transaction)
Upfront investment
Execution
Access to
transportation
authorities
Regulatory barriers
Money on hand for
investment
Opportunity cost
52

Market
Market size: See exhibit 1
Competitors: There are two major competitors in
the market, including PayCo. They both offer Tap &
Go services.
Substitutes: Assume that the main payment
method for public transportation is cash
Economics
See Exhibit 2
Assume a discount rate of 0%
PayCo Credit Cards
Company
Customers: Commuters, the majority of whom
have credit cards
Capabilities: PayCo has a strong track record

with Tap & Go and a good brand name. Since public
transportation is currently cash dominated, it does
not have strong relationships with transit providers
Execution
No additional information to provide.
These points should be taken into consideration
when assessing the risks.
53
Question #1
Question #1:
PayCo has identified three key cities on which it would like to focus. As a first step, it would like to enter one
city and service one mode of transportation. Based on the information we gathered and given a 5 year
horizon (2011-2015), which city and mode of transportation should PayCo target?
(Present the interviewee with Exhibit #1)
Not all data points in the exhibit are necessary for reaching a conclusion. The interviewee should focus on
the most relevant information.
The industry in question is credit cards, and so the interviewee can assume that the main source of
revenues will be fees (as a % of transactions). Since we dont know anything about potential differences in
the size of the fees, costs or penetrations rates, well assume theyre the same for all three cities.
An expected value approach can be used to assess which city / mode of transportation are most attractive.
Expected Value = Revenue * Number of Years * Probability of Implementation (* unknown % fee).
For example, the value of the New York Subway is (% fee) * ($12B*4*90%) = $43.2B*%fee.
Repeating the same exercise for the New York Bus: $5.4B*4*80%*fee = $17.3B*%fee
London: Subway = $36.4B; Bus = $16.2B
Tokyo: Subway = $9.6B; Bus = $13.8
Based on the expected value analysis, the New York Subway seems like the best target.
The New York population growth and GDP also support entering this market.
PayCo Credit Cards
54
Question #2
Question #2:
Our analysis of the New York subway market yielded the following results. Would PayCo be able to break
even within 5 years?
(Present the interviewee with Exhibit #2)
Upon request, provide the information that the upfront investment in the launch is $5M.
PayCo will break even in 2014 (see further information on the calculations on the next page)
Revenues
Costs
2011
2012
2013
2014
2015
License
250K
250K
250K
250K
250K
Proc. Fee
7.5M
10M
12.5M
15M
15M
Per Trans.
6M
8M
10M
12M
12M
A&D
2M
1M
500K
SG&A
50K
50K
50K
50K
50K
-300K
1.2M
2.2M
3.2M
3.2M
Profit
PayCo Credit Cards
55
Question #2 (Continued)
Question #2 Calculations:
Transaction fee: 0.2% of transaction.
In 2011 there are transactions worth $3.75B, so the revenue would be 3,750,000,000*0.2% =
3,750,000,000*(2/1000) = 3,750,000*2 = 7.5M
Cost per transaction: $0.004 per transaction.
In 2011 there are transactions worth $3.75B. Given an average transaction size of $2.5, the total number of
transactions is 3,750,000,000/2.5 = 1,500,000,000.
The cost per transaction is hence 1,500,000,000*0.004 = 1,500,000*4 = 6M
Annual profit = (license fee + total transaction fees) (total transaction cost + A&P + SG&A)
Breakeven will be reached when total profits will cover the upfront investment of $5M.
This will happen in 2014.
PayCo Credit Cards
56
Conclusion
Recommendation
o PayCo should enter the New York Subway market: it has a high revenue potential, a high probability of
implementation and a shorter-than-required break-even period
o It would make sense to enter additional cities / modes of transportation in the next 5 years
Risks
o Our projections of the implementation probability and number of transactions may be inflated
o Response from our major competitor
o Regulations resulting from privacy and security concerns
Next Steps
o Create an implementation plan for entering the New York Subway market
o Build relationships with the Metropolitan Transportation Authority

o Analyze additional markets to identify further opportunities
PayCo Credit Cards
57
Exhibit #1
City
New York
London
Tokyo
Population
8.2M
7.8M
13.1M
Pop. Growth
0.9%
0.7%
0.8%
GDP
$1,406B
$565B
$1,479B
Subway
NYC
London
Tokyo
Bus
NYC
London
Tokyo
Annual ridership
1.604B
1.107B
3.160B
Annual ridership
0.747B
1.780B
1.946
Annual revenues
$12B
$13B
$16B
Annual revenues
$5.4B
$9B
$11.5B
Expected Year
of Implement.
2012
2012
2014
Expected Year
of Implement.
2012
2014
2013
Probability of
Implement.
90%
70%
20%
Probability of
Implement.
80%
90%
40%
PayCo Credit Cards
58
Exhibit #2
Economics of the New York Subway Tap & Go Market
2011
2012
2013
2014
2015
Average Size of
Transactions
$2.5
$2.5
$2.5
$2.5
$2.5
Annual
Transactions
$3.75B
$5B
$6.25B
$7.5B
$7.5B
Advertising and
Promotions
$2,000,000 $1,000,000 $500,000
$0
$0
SG&A
$50,000
$50,000
$50,000
$50,000
$50,000
License Fee: $250,000/year

Transaction Fee: 0.2% of transaction
Transaction Cost: 0.004 cents/transaction
PayCo Credit Cards
59
Case: Packaging Operations Integration

Case Type: Private Equity Post-Merger Integration

Our client is a Private Equity fund that has made a number of acquisitions in the past few years, mainly in
the pulp, paper and packaging industries. Our client just made a recent acquisition of Packaging Inc., a
large US-based packaging company in the hope of driving synergies with one of the funds existing portfolio
companies, Aluminum Inc. One of the main areas where our client thinks they can achieve synergies is in
the companies supply chains. Do you agree with this assumption and if so, what synergies do you think are
possible and how would you quantify the potential benefits?
Case Commentary (Notes to the
interviewer)
The aim of this case is to firstly see

whether the interviewee can think
strategically about where potential
synergies might arise and then to test the
interviewees ability to understand data
and make conclusions
The interviewees initial framework should
incorporate at least some of the
elements on the next slide
Each question will have an exhibit for the
candidate to analyze
Data (To be provided upon request)
Packaging Operations Integration
Ignore operations outside of the US

Packaging Inc. sells food packaging containers (mainly made out of
foam) to Retail customers (e.g. Wal-Mart type stores) and to Restaurant
customers, mainly via large distributors.
Aluminum Inc. sells aluminum packaging products to Retail and
Restaurant customers
Packagings products are very light but take up lots of room and
Aluminums products are dense (i.e. heavy but take up little room)
Assume supply chain can be defined from the procurement of raw
materials all the way to the final delivery of finished products
Seasonality: Packaging Inc. has a peak in the summer and Aluminum
Inc. has a peak around Thanksgiving
Only if requested, you can provide the map (Exhibit 1) to show the two
companies current footprint
60
Sample Framework
Better Understand the 2 Companies

Baseline various supply chain costs
Understand the two companies businesses, their customers, strengths/weaknesses
Potential Synergies
Procurement
Raw materials
Services (e.g. transportation, warehousing labor, etc.)
Other (e.g. machines, repair parts, etc.)
Manufacturing
Number of plants
Utilization of manufacturing lines at each plant
Expertise / techniques (i.e. shared knowledge)
Transportation
In-bound from raw material sources
Out-bound to customers
Optimized truck loads
Warehousing
Consolidation of footprints (i.e. reduced facility fixed costs)
Reduced overall labor (i.e. reduced facility variable costs per unit of output due to economies of scale)
Inventory
Less impact from seasonality of products
Fewer holding locations
Quantifying Potential Benefits
Benchmarks
Data modeling
Comparing existing contracts
61
Notes to Sample Framework

Procurement: Buying in bulk and consolidating the number of suppliers can reduce unit costs
Transportation: More volume being transported on the same transportation routes can drastically
improve economies of scale
In-bound from raw material sources: The interviewee should recognize that because the
two companies make different products and therefore use different source materials, this is
probably a relatively minor opportunity
Out-bound to customers: The interviewee should have recognized that the two companies
probably share many of the same customers, which would make this a significant opportunity
Optimized truck loads: Packaging Inc. has very light products to ship because their
products are made out of foam but Aluminum Inc. has very heavy products. That means that
Packaging Inc. will exceed the volume of a truck but not weigh it out, but Aluminum Inc. would
do the exact opposite. Therefore by mixing the two companies products, you can better use
your trucks
Inventory
Less impact from seasonality of products: Aluminum Inc. has a big demand spike near
Thanksgiving when people are roasting turkeys whereas Packaging Inc. has a seasonal spike
in summer when people are purchasing cups to drink outdoors
Fewer holding locations: By consolidating facilities, you have fewer locations that need to
hold inventory and therefore you have more stable demand patterns
Comparing Existing Contracts: E.g. if Packaging Inc.s labor contracts are cheaper than
Aluminum Inc.s because Packaging Inc. is a much bigger company, Aluminum Inc. could benefit
from these cheaper rates
62
Question #1
Question #1:
What do you learn about the two companies and the potential synergy opportunities by looking at this
map?
If the interviewee did not ask for the map prior to creating the framework, give it now
Observations
Many more Packaging Inc. sites than Aluminum Inc. sites
Most plants and warehouses are co-located
Heavy footprints in California, Chicago area and the eastern seaboard
Most locations are near or in large metro-areas
Packaging Inc. has many combined Retail/Restaurant facilities but Aluminum Inc. does not
Packaging Inc. has very few dedicated Retail facilities, but their average sizes are very large
Aluminum Inc.s facilities are much smaller on average
Opportunities
More locations could help Aluminum Inc. sells its products in more regions, or at least reduce its freight cost of
transporting heavy products long-distance across the country to customers
Consolidate facilities where there are some regional overlaps (e.g. southern CA)
Consolidate facilities where Retail and Restaurant are not being stored in the same locations
Small and very large (i.e. >800k ft2) facilities can start to become inefficient potential to create optimal size
warehouses
63
Exhibit #1: Current Footprints
Business Unit
Packaging Inc.
Aluminum Inc.
Facilities
Total ft
Facilities
Total ft
Restaurants
15
4.3m
0.2m
Retail
1.7m
0.8m
Aluminum Inc. Warehouse
Both
19
9.9m
Other Warehouses
Total
36
15.9m
11
1.0m
Manufacturing Plant
Packing Inc. Warehouse
64
Question #2
Question #2:
Given exhibits 2 and 3, what freight savings can you estimate by combining the two companies?
There are different ways to calculate this. One way is first to calculate the effect of reduced rates and
then to calculate the effect of mode optimization:
New Total Freight Expenses
New Freight Expenses Due to Rate Optimization ONLY

Packaging
Inc.
Truckload
Less Than Truck
Load
Intermodal
Small Package
Aluminum
Inc.
Before
Total
92 (unchanged)
24 (reduced
by 33%)
116
4 (unchanged)
10
(unchanged)
14
26 (unchanged)
3 (reduced by
25%)
2 (reduced by
33%)
8 (unchanged)
116
108.75
Less Than Truck

Load
14
10.5
29
Intermodal
29
29
10
Small Package
10
10
TOTAL
158.25
Total savings = 183 158.25 = 24.75m (13.5%)

Truckload
After
Math
87 + (1 - 25%) x 29
7 + (1 - 50%) x 7
65
Exhibit #2:
Total Freight Expenses by Mode ($m)
180.0
160.0
140.0
92.0
125.0
120.0
100.0
183.0
80.0
60.0
4.0
26.0
3.0
36.0
40.0
58.0
20.0
-
10.0
4.0
8.0
66
Exhibit #3:
Cost to Transport 1 Pound, 1 Mile By Mode
Packaging Inc.
Aluminum Inc.
Truckload
$1.00
$1.50
Less Than Truck Load
$2.00
$2.00
Intermodal
$0.75
$1.00
Small Package
$3.00
$2.00
Assumptions after integration

Either company can benefit from optimal rates
50% of previous Less Than Truckload shipments can now go Truckload
25% of previous Truckload shipments can now go Intermodal
30% of previous Small Package shipments can now go Less Than Truckload
Total miles and total pounds shipped do not change prior to integration
67
Conclusion
Recommendation
o Significant synergies in supply chain merger: Procurement, manufacturing, freight, warehousing,
inventory
o Freight savings alone would be $24.75m per year
Risks
o Freight savings assumptions might be too aggressive (i.e. how much of the rates we could actually
share and how much of the modes we can actually optimize)
o Freight is significant but we dont yet know if the other supply chain areas will yield similar levels
of savings
o These efforts are complicated to implement and can lead to significant operational disruptions
Next Steps
o Investigate other supply chain opportunity areas to prioritize implementation initiatives
o Assess capital requirements to value the projects NPVs

o Begin implementation first on highest NPV projects
68
Case: Accountware
Case Type: Acquisition Screen

Our client, Accountware, is a software company that makes accounting software for public
companies. After several strong years, Accountware is looking to make an acquisition. The CEO has
narrowed the list of potential targets down to 3 companies: BankWeb, HospitalAccount, and Retail
Inventory. Accountware has hired our firm to determine which target it should pursue.

This case is designed so that candidate will compare
the 3 firms on both a financial and strategic basis. The
prompt is purposefully broad; the candidate should
recognize the need to analyze both elements of each
target. Ultimately, the candidate will be asked to pick a
target and then suggest a buying price.
The case can be given as interviewer-led by asking the
questions, or the interviewer can allow the candidate to
lead by using the information answering the questions.
Accountware

If asked for more information on goals: the CEO
wants the acquisition to make both financial and
strategic sense.
BankWeb makes websites for banks, HospitalAccount
makes accounting software for hospitals, and Retail
Inventory makes inventory software for clothing
stores.
If asked, Accountware does not work in web
development, inventory tracking, or provide
accounting software to hospitals.
69
Sample Framework
Financials
Cash/debt can buy?

Profit
Geography
Our client
Strategic
Market
Size/growth/share
Culture
Customer who?
Capabilities
Strengths/gaps
Price
Multiples
Profit
Synergy
Comparable Multiples
Strategic
Market
Financials
BankWeb
Cost
Revenue
Geography
Size/growth/share
Customer who?
Capabilities
Alignment?
Competitors
Differentiators
Ownership want to sell?

Hospital
Account
same
Retail Inve.
same
Other
Regulatory
Accountware
Culture match?
70

Accountware
BankWeb
Strong financials; have Makes websites for

$150mn in cash
regional commercial
banks
Serve US public
companies under $1bn Currently serving 5

in revenue
regional banks on east
coast of US
Across multiple
industries
Provide groundbreaking websites that
Help with reporting for
have won best website
SEC filings
from Forbes
Strong software
Competes with internal
development team,
IT departments and
located in both NYC
other website
and Palo Alto, CA
companies
Considered industry
For regional banks,
leading in space
estimated at 10%
Culture: professional
market share
Flat market growth
Started by two college
grads in 2006
Hospitalaccount Retail Inventory

Manufactures
accounting software
for hospitals
Inventory tracking
system for clothing
retailers
Developing software
that accounts for
disclosures required
by new health care
policies
Looking to expand into

other retail categories
with perishable goods
Mid-tier quality
2% market share
Was 2% market
growth; accelerated to
5% last 4 years
Has been run by same
CEO, the founder,
since 1995
Other
There are no
regulatory concerns
with the acquisition of
any of the targets
Competes well with

other inventory
tracking systems
created by larger
companies
5% market share
Market growing at 3%
CAGR
PE ownership,
purchased the
company 18 months
ago
Culture: start-up
Accountware
71
Question #1
Question #1:
From a strategic prospective, discuss the advantages and disadvantages of each target.
BankWeb
Pros: Industry leading, excellent quality. Rapid growth.
Cons: Flat market growth; not core to what Accountware does
HospitalAccount
Pros: Familiar capability set, positioning for new growth with healthcare disclosures, rapidly growing market
Cons: Middle of the road capabilities, small market share
Retail Inventory
Pros: Strong competitor with larger companies; poised for growth
Cons: Non-core capabilities, low market share
Accountware
72
Question #2
Question #2:
From a financial prospective, which looks like the best target? [Give Exhibit 1]
If asked:
Do not expect synergies from BankWeb
Do not expect synergies from Retail Inventory
Prompt candidate to suggest synergies for HospitalAccount
BankWeb appears to be very attractive because of its high EBITDA margin
A good candidate will recognize that synergies from the merger would make HospitalAccounts financials more
attractive
A superior candidate will observe that HospitalAccount has far more sales people and developers than necessary
and will make a specific suggestion as to how those numbers could be brought in line proportionally to
Accountwares numbers (look at Revenue/person ratios for both sales people and developers)
See Exhibit 1 solution (finding these precise answers is not necessary; the key is recognizing that Accountwares
familiarity with accounting software development combined with its scale should help improve HospitalAccounts
financials)
Accountware
73
Question #3
Question #3:
Which target should Accountware pursue and why?
What price should Accountware expect to pay? [Give Exhibit 2]
The candidate should use the comparable numbers provided in Exhibit 2 to estimate a price based on their choice of
targets.
Candidate should develop an industry average and should ignore one of the companies from each industry.
Accountware
74
Conclusion
Recommendation
o Based on both strategic and financial fit, Accountware should pursue Hospitalaccount. This
acquisition will allow Accountware access to new customers while using its familiarity with the
product to reduce costs at the target.
Risks
o Cultural fit is the CEO going to retire and is he the key to the organization?
Next Steps
o Need to examine willingness to sell of ownership

o Look at cultural fit
Accountware
75
Exhibit #1
Revenue
COGS
Gross Profit
SG&A
EBITDA
Sales people
Software Developers
Accountware
Bank Websites Hospital Accounting Retail Inventory Accountware

15,000,000
35,000,000
30,000,000
100,000,000
7,500,000
28,000,000
21,000,000
60,000,000
7,500,000
7,000,000
9,000,000
40,000,000
1,500,000
7,000,000
3,000,000
10,000,000
6,000,000
0
6,000,000
30,000,000
15
30
70
93
30
60
100
200
76
Exhibit #1 Solution
as % of Sales
COGS
Gross Profit
SG&A
EBITDA
BankWeb
50%
50%
10%
40%
Revenue/person
Sales people
Software Developers
$1,000,000
$500,000
HospitalAccount Retail Inventory Accountware

80%
70%
60%
20%
30%
40%
20%
10%
10%
0%
20%
30%
$500,000
$375,940
$1,000,000
$500,000
$1,000,000
$500,000
Revised Forecasts
Revenue
COGS
Gross Profit
SG&A
EBITDA
Sales people
Software Developers
Accountware
BankWeb HospitalAccount Retail Inventory Accountware

15,000,000
35,000,000
30,000,000 100,000,000
7,500,000
21,000,000
21,000,000
60,000,000
7,500,000
14,000,000
9,000,000
40,000,000
1,500,000
3,500,000
3,000,000
10,000,000
6,000,000
10,500,000
6,000,000
30,000,000
15
30
35
70
30
60
100
200
77
Exhibit #2
Recent Acquisitions
Company
Market
Industry
Clothing Tracking
US Inventory software
Retail Counter
Restaurant Tracker
US Restaurant Inventory software
Japan Accounting
Japan Accounting software
AccountMan
US Accounting software
QuickCounting
Web Fast
US Web development
Quick Web
US Web development
Web Flash
US Web development
Accountware
Sales
50
70
1,500
150
30
48
30
5
40
($ millions)
EBITDA Acquisition Price
10
50
15
75
200
400
75
675
7
42
12
72
8
96
2
30
10
120
78
Exhibit #2 Solution
Recent Acquisitions
Company
Market
Industry
Clothing Tracking
Retail Counter
Restaurant Tracker
US Restaurant Inventory software
Japan Accounting
Japan Accounting software
AccountMan
QuickCounting
Web Fast
US Web development
Quick Web
US Web development
Web Flash
US Web development
Sales
50
70
1,500
150
30
48
30
5
40
($ millions)
EBITDA Acquisition Price Sales multiple EBITDA multiple Comparable EBITDA
10
50
1.00
5.00
5
15
75
1.07
5.00
200
400
0.27
2.00
75
675
4.50
9.00
6
7
42
1.40
6.00
12
72
1.50
6.00
8
96
3.20
12.00
12
2
30
6.00
15.00
10
120
3.00
12.00
Should ignore Resturant Tracker (too big), Japan Accounting (wrong market), and Quick Web (too small)
Accountware
79
Case: Madecasse
Case Type: Non-profit

Two entrepreneurs have a launched a non-profit chocolate bar manufacturing company called
Madecasse. The goal of Madecasse to improve conditions for people in Madagascar by selling
chocolate bars to consumers in the United States. Our firm is working with Madecasse on a probono basis to determine (1) where to source materials (Venezuela, Madagascar, Columbia) (2) how to
market the bars in the United States.

This case examines a relatively straight-forward
business question from a non-profit prospective. A
strong candidate will recognize that maximizing profit
for Madecasse is not the best result and will instead
focus on maximizing impact for people in Madagascar.
Madecasse

If asked to clarify the goal of Madecasse, the
interviewer should emphasize that the mission of
Madecasse is to improve the economic welfare of
people in Madagascar.
Assume that Madeccase will be able to sell as many
chocolate bars as it makes.
Manufacturing will take place in the same location as
the coco.
80
Sample Framework
Madagascar
Social
Political
Economic
Demographics
Income distribution
Culture
Stability
Family structure
Rule of Law
Industries
Sourcing
Options
Venezuela
Madagascar
Columbia
Preferences for chocolate
US consumers
WTP
Average spend
Climate for coco?

Agriculture
Infrastructure
Costs
Technology use
Fixed
Variable
Dark/milk
With(out) nuts/fruit
Normal bar
Bar with cause
By demographic group
Distribution
options
Retail/grocery
Online
Other
chocolate
bars
# other options
Current share
Types
Marketing approach
Other
Regulations
Madecasse
Crops per hectare

Available land
81

Madagascar
Population of 22M
Literacy: 70%
GDP/capita: $900
GDP is 30% agriculture
Population below
poverty line: 50%
Sourcing Options
Labor costs are highest Growing taste for dark

in Venezuela and lowest
chocolate
in Madagascar
Typically buy chocolate
Venezuela employs
bars as impulse buys at
more technology and
grocery store or
thus can harvest more
convenience stores
rapidly
Generally willing to pay
Fields yield more crops

Fairly stable
per hectare in
government now, recent
Venezuela and least in
history of instability
Madagascar
Colombia has most
available land,
Madagascar the least
Madecasse
US Consumers
$2/bar
Top 25% of income
earners willing to pay
more for high-end bars
Other bars/Distrib.
3 primary brands with
multiple products
Typically have
ingredients outside of
chocolate (e.g. nuts,
caramel)
Sold through grocery
stores, convenience
stores, and gas stations
Growing tendency to
pay more for items
associated with a cause
82
Question #1
Question #1:
Where should Madecasse source its coco beans? They are considering three options: (1)
Madagascar (2) Colombia (3) Venezuela.
Questions:
(A) What subjects would you consider in comparing these 3 sources?
(B) [Give Exhibit 1] Which market should they source from?
The candidate should quickly brainstorm a way to compare the markets or can build on work from the initial
framework. Potential subjects include: Costs (labor, transportation, equipment, etc.), quality, harvest size, export
issues, tariffs, local government issues, environmental concerns.
See Exhibit 1 Solution for math explanations
The candidate should find that greater profit is available by producing in Colombia or Venezuela.
However, the overall impact on Madagascar that Madacasse can make is greater by producing in Madagascar
because all of the labor costs are actually contributing to local well-being. Therefore, the company can have the
greatest impact by sourcing coco beans from Madagascar.
Madecasse
83
Question #2
Question #2:
What considerations should Madacasse take into account when selling bars to American
consumers?
[The goal of this section is to have a discussion with the candidate. The candidate should
brainstorm ideas and can use initial framework. Guide the conversation to cover (1) the target
demographic (2) probable distribution channels (3) how to position the bar vs. competitors]
Target demographic: should include wealthier individuals who tend towards purchasing higher-end foods.
Distribution channels: higher-end grocery stores and convenience stores in wealthy neighborhoods. Could include
partnerships with wine stores, coffee shops, etc.
Positioning: Various solutions are possible, but should include (1) proceeds to charity and (2) emphasize quality
Madecasse
84
Conclusion
Recommendation
o Madacasse should source its coco from Madagascar, which will result in an impact of $375m. The
chocolate bars should target wealthy American consumers and be sold through high-end stores
and partnerships with coffee shops.
Risks
o Even wealthy consumers may not be willing to pay $5/bar, especially in a recession
o A resurgence in instability in Madagascar would disrupt operations
Next Steps
o Interview consumers about WTP for bars
o Find reliable suppliers in Madagascar
Madecasse
85
Exhibit #1
Madagascar Colombia Venezuela
Pounds/hectare
3,000
5,000
6,000
Available hectares
12,500
20,000
17,000
Manhours to harvest a hectare
$/man hour
Bars/pound of beans
Price per bar
Madecasse
$1.50
$1.75
$2.25
2
$5.00
2
$5.00
2
$5.00
86
Exhibit #1 Solution
Pounds/hectare
Available hectares
Total Harvest
Manhours to harvest a hectare
Total Time to Harvest
$/man hour
Total Labor Costs
Cost/Pound
Cost/bar
Bars/pound
Bars
Price per bar
Revenue
COGS
Profit
Spending in Madagascar
Impact to Madagascar
Madecasse
Madagascar
3,000
12,500
37,500,000
6
225,000,000
$1.50
$337,500,000
$9.00
$4.50
Colombia
5,000
20,000
100,000,000
5
500,000,000
$1.75
$875,000,000
$8.75
$4.38
Venezuela
6,000
17,000
102,000,000
3
306,000,000
$2.25
$688,500,000
$6.75
$3.38
2
2
2
75,000,000
200,000,000
204,000,000
$5.00
$5.00
$5.00
$375,000,000.00 $1,000,000,000.00 $1,020,000,000.00
$337,500,000.00
$875,000,000.00
$688,500,000.00
$37,500,000
$337,500,000
$375,000,000
$125,000,000
$331,500,000
$125,000,000
$331,500,000
87
Case: Canadian Retailer

Case Type: Private Equity Investment

Your client is a Canadian Retailer, CR, that has $4 billion in annual sales spread over 400 stores. They
specialize in general merchandise, i.e. hardware, housewares, and seasonal goods. Recently Walmart
and Home Depot have decided to enter the Canadian market. To prepare for the impending threat, CR
has hired your company to help them determine how to increase profits by $100 million in the next 12
months.
This is a standard revenues / profits / costs case

that chooses to focus on the cost savings side.
Canadian Retailer
88
Sample Framework
Increase Revenues:
Increase Price
Customization
Add Value
Cross-sell and bundle
Increase Volume
Sell in new markets
Increase frequency of purchases (customer loyalty programs)
New products (beware of cannibalization)
Steal share
Decrease prices
Promote more
Establish deals with distributors to increase distribution channels
Decrease Costs
Fixed Costs
PP&E
Marketing
SG&A
Variable Costs
COGS
Consolidate purchasing
Volume discounts
Labor
Canadian Retailer
89

Market
What is overall market growth potential? How much
market share does CR anticipate losing (if any)? What
does the competitive landscape look like?
Current players
- Mom and Pop stores (70% mkt share)
- CR (30% market share)
Future Players: Walmart, Home Depot, CR, Mom and
Pop
Revenue
Distribution across Canada

Segmentation
Demand cycles across the days of the week;
seasons of the year
Company
What is the overall pricing strategy for CR? Where can
CR cut prices and where can it raise them? How much
would each store need to make to get to the $100
million?
Price CR runs a promotional pricing strategy where it

has prices that are both lower and higher than its
competitors depending on the good. They execute this
strategy by using coupon books, ads in the paper, and
radio
Cost
How much does each store need to save to reach the 100
million? If its going to be a permanent change, it should
be in the variable costs. What kind of variable costs
would the store have? Extra info: profit tends to be 010% of revenues with an average of 5% (they should
determine profit of 200 million from this info)
Variable as a percentage of sales
COGS 80%
Labor - 10%
Rent 5%
Canadian Retailer
90
Question #1
Question #1:
Looking at the variable costs, where would you look for opportunities?
Labor:
How is labor tasked store manager discretion
Cashiers, greeters, janitorial staff
One issue CR has noticed is that they dont differentiate between the work week and the weekend in terms
of labor required. This leads to long lines on Saturday and undertasked employees during the week. Do
they need the same amount of cashiers all the time? Can employees do more than one activity?
Demand cycles
Average transaction time
Service level
Rent:
Pretty non negotiable and CR doesnt have an interest in rural areas that would be very cheap
COGS:
Could negotiate with suppliers
Forecasting might help buy in bulk
Not really savings but what about exclusive products?
Canadian Retailer
91
Conclusion
Recommendation
Recommendation: To maintain their stronghold on the Canadian market CR should focus on decreasing its
costs. It can do so by focusing on Divest excess capacity or using excess capacity for another purpose,
leasing store space instead of buying, relocating somewhere cheaper outside of Canada, reducing marketing
and relying on its known brand equity within the Canadian market, look for opportunities to decrease SG&A
and infrastructural costs. CR should also specifically look at its labor practices to determine if there is an
opportunity for costs savings there.
Next Steps
Next Steps: CR should now move to take a closer look at its supply chain and internal costs to identify
Specific opportunities to decrease its costs and increase its ability to be competitive in the market. CR
should also determine the feasibility of the measures recommended.
Canadian Retailer
92

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CASE BOOK

December 15, 2009

TechCo Geographic Expansion

PayCo Credit Cards

Packaging Operations Integrations

Case: Biologics Supplier

Problem Statement Narrative

Case Commentary (Notes to the interviewer)

Data Set (To be provided upon request)

Price (have we decreased

Current Competitors (are

Potential Areas for Analysis

Product Mix: Our product mix has remained

Customers (key area in this case)

Exhibit #1 and Math

o Next Step #2: Assess our own expertise

Exhibit: Biologics Demand and Capacity

2012e 2013e 2014e

Case: TechCo Geographic Expansion

Notes to the interviewer

Info/Data (To be provided upon request)

The goal of this case is to, first, have the

The interviewee should consider each entry

The interviewee should focus exclusively

TechCo Geographic Expansion

Then, Id like to evaluate the three proposed strategies:

TechCo Geographic Expansion

Quantitative Problem Solving

TechCo Geographic Expansion

Qualitative Problem Solving

TechCo Geographic Expansion

TechCo Geographic Expansion

Case: Beverage Company

Problem Statement Narrative

Case Commentary (Notes to the interviewer)

Data Set (To be provided upon request)

Case: Project Gemini

Case Commentary (Notes to the interviewer)

Data Set (To be provided upon request)

Case: Smartphone Acquisition

Problem Statement Narrative

Case Commentary (Notes to the interviewer)

Data Set (To be provided upon request)

Potential Areas for Analysis

Customers and Products

Hand the candidate Exhibit #2 (see slide for notes).

Exhibit #1 and Math

Our client shouldnt acquire either player. Potential reasoning:

Exhibit 1: Mobile Phone Market (2007 est.)

(total market: $60b)

(total market: $80b)

(total market: $300b)

Current Smartphone Market:

Exhibit 2: Customer Survey

Exhibit 3: Customer Survey by Segment

Case: Pet Medication

Problem Statement Narrative

Case Commentary (Notes to the interviewer)

Data Set (To be provided upon request)

The interviewer will ultimately discover that some

Once prescribed, Clean Heart is taken weekly for one year.

Suggested Order for Case

Relations with Petvascent